Russian Executives Weigh In on Arctic Development Plans
As Russia’s state nuclear corporation Rosatom draws closer to gaining nearly exclusive control over the Arctic’s storied Northern Sea Route, a number of executives and government officials weighed in on the legal disarray surrounding the route’s development.
Their remarks came at the St. Petersburg Economic Forum, a yearly showcase of Russia’s business policy, which draws numerous oil and banking heavyweights from around the world, and, since 2005, has become an obligatory stop for those wishing to do business with the Putin regime.
The future of the Northern Sea Route is an obvious big-money concern. Thanks to the Arctic’s colossal oil and natural gas reserves, Putin recently decreed that the icy 6,000-kilometer (3,700-mile) route from Europe to Asia must brace for a predicted 80 million tons of annual traffic by 2025.
Yet how to do that remains in question and strikes some observers as overly optimistic. Russia advertises that shipping via the Northern Sea Route, with the help of its nuclear icebreakers, lops as much as 30 percent off the time it takes to ship through the Suez Canal.
The drawback is that most shipping has to be done during summer months when the ice levels retreat. Climate change is lending its sinister hand, but the government has launched a huge nuclear icebreaker buildout to shuttle cargo from East to West and within the Arctic year-round. The Kremlin says that it needs six nuclear icebreakers and four icebreakers operating on LNG to handle the traffic uptick by 2026.
Enter Rosatom, which since November, has been crafting legislation, with Putin’s blessing, that would make it responsible for nearly every aspect of infrastructure along the Northern Sea Route.
But the bill is running into trouble. Russia’s Accounts Chamber, the parliament’s independent financial oversight body, has said Rosatom’s Arctic development budget can’t be funded until 2020. The Ministry of Transport, which currently oversees Arctic traffic, says the Rosatom bill takes away its regulatory oversight and toll collection for shuttling vessels through the route.
Speaking at the Economic Forum, Alexei Likhachev, Rosatom’s head, essentially promised his state company could take those responsibilities on and said the route needs to stay open for year-round use.
Other executives and officials at the forum were supportive of any plan that would bring some legal uniformity to Arctic development, which they say is disorganized and underfunded.
Yet Dmitry Kobylkin, the minister of natural resources and ecology, was suspicious that any single structure in the country could head up Arctic infrastructure all by itself. “We need to answer the main question: what do we want to have in the Arctic?” he asked the forum. “If we want to develop it, it’s necessary to approach the issue seriously. This, of course, will require a great deal of money.”
He urged the government to devise a separate law on Arctic development, saying current programs are insufficient — a view shared by those who do most of the shipping along the route.
Denis Khramov, deputy chairman of Novatek — which is heading up a $20 billion LNG project on the Yamal Peninsula — wants year-round navigation through the Arctic. By 2030, he expects the company’s gas projects to ship 50 million tons annually. That could increase by another 100 million tons if Novatek’s second Yamal Peninsula gas project bears fruit.
Yelena Bezdehezhnikh, vice president of Norilsk Nickel, weighed in in favor of a comprehensive development scheme for the Arctic, which would include major port development to help handle its five million tons of shipments a year, and she told the forum that one government department should oversee all aspects of that endeavor. “At present, the environmental policy is the responsibility of one department, transport the other. With this approach, we will never have comprehensive development of the Northern Sea Route or development of the Arctic as a whole.”
Marina Kovtun, governor of the Murmansk Region, cited Norway’s Stavanger region as a model of what the city of Murmansk and its environs could become should Arctic development be handled wisely.
Naturally, such intensive development in the Arctic carries with it enormous environmental risks. Aleksei Knizhnikov of the WWF-Russia, noted that the IMO was currently crafting a ban on the use of heavy types of marine fuel in the Arctic. “We will only benefit if we switch shipping in the Arctic to LNG,” he told the forum, something that would help eliminate the possibility of oil spills.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.